DCIT Vs Nobroker Technologies Solutions Pvt. Ltd (ITAT Bangalore)
The Bangalore Bench of the Income Tax Appellate Tribunal (IT AT) dismissed the Revenue’s appeals for Assessment Years (AYs) 2018-19 and 2021-22, upholding the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] in favour of the assessee. The principal issues involved the allowability of Employee Stock Option Plan (ESOP) expenditure under Section 37 of the Income-tax Act, 1961, and the applicability of disallowance under Section 14A read with Rule 8D where no exempt income had been earned during the relevant year.
For AY 2018-19, the Revenue challenged the CIT(A)’s decision allowing deduction of ESOP expenses amounting to ₹5,75,25,897 and deleting the disallowance made under Section 14A. The Tribunal treated this year as the lead case, noting that the issues in AY 2021-22 arose from a similar factual matrix.
Regarding the ESOP issue, the assessee had claimed deduction under Section 37 for expenditure incurred in relation to stock options granted to employees. During assessment proceedings, the assessee contended that ESOPs constituted consideration for services rendered by employees and represented additional remuneration linked to employment. It argued that the expenditure satisfied the requirements of Section 37 and relied upon the Karnataka High Court’s ruling in CIT v. Biocon Ltd. in support of its claim.
